Terra / Luna collapse

An 'algorithmic' stablecoin depegged into a mint-and-burn death spiral.

The world stops matching the model. Regime change and leverage turn a small error fatal.

Room: Q4 Where models die
Year: 2022
Impact: $40B+
Sector: Stablecoin
Region: Global
Category: Economic

Why this room

UST/LUNA's payoff was reflexive and circular rather than simple, each token's value backstopped only by demand for the other, and its failure mode was fat-tailed and discontinuous, a year of calm followed by total collapse in six days, the classic Q4 signature, until the discovery of a concealed 2021 bailout reclassified the story from model failure to deliberate deception.

The record

LUNA market cap peaked above $40 billion; UST supply near $18 billion before collapsecertain
Anchor Protocol paid ~19.5% yield on UST deposits, subsidized at roughly $6 million/day by April 2022certain
May 7, 2022: two addresses withdrew 375 million UST from Anchor, triggering the runlikely
LUNA supply rose from about 1 billion to 6 trillion tokens in three days; price fell from ~$80 to fractions of a centlikely
LUNA peaked at $119.18 on April 5, 2022certain
Total losses across the Terra ecosystem estimated at roughly $40 billioncertain
May 2021: Jump Trading secretly deployed capital (reported ~$62 million) to restore the UST peg, undisclosed to investorslikely
Do Kwon pleaded guilty August 12, 2025 to conspiracy and wire fraudcertain
Sentenced December 2025 to 15 years in prison; ordered to forfeit ~$19.3 millioncertain
Terraform Labs and Do Kwon settled SEC civil fraud charges for $4.47 billioncertain
Chai payment app fraud allegedly used ~$145 million in stablecoins to fake blockchain transactionsuncertain

Sources

The book

This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.

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